Q4 2019 Earnings Call

This call is being recorded.

This time I will turn the call over too much <unk> Investor Relations for Skyworks. Mr. Host. Please go ahead.

Thank you Rob good afternoon, everyone and welcome to Skyworks fourth fiscal quarter anchor in 2019 conference call.

With me on the call today are Liam Griffin, our President and Chief Executive Officer, Chris Ciena, So our Chief Financial Officer.

Before we begin I would like to remind everyone that our discussion will include statements relating to future results and expectations that are or maybe considered forward looking statements.

Please refer to our earnings press release, and recent SEC filings, including or annual report on Form 10-K .

For information on certain risks that could cause actual outcomes to differ materially.

And adversely from any forward looking statements made today.

Additionally, the results and guidance, we will just gosh include non-GAAP financial measures consistent with our prior practice.

Please refer to our press release within the Investor Relations section of our company website for complete reconciliation to GAAP.

With that I'll turn the call over to them.

Thanks, Mitch and welcome everyone.

The Skyworks team delivered solid profitability and strong cash flow in Q4 and throughout the fiscal year.

Demonstrating our technology leadership and the resilience of our business model, despite the challenging end market.

During the fourth fiscal quarter, we grew revenue, 8% sequentially and excluding walkaway revenue was up 20% sequentially.

We produced gross margin of 50.3% an operating margin of 34%.

We posted earnings per share $1.52 cents.

Ahead of our guidance and up 13% sequentially.

And we generated exceptional operating cash flow totaling $417 million.

For the 2019th fiscal year, we delivered revenue of 3.4 billion earnings per share of $6.17 and operating cash flow of 1.4 billion.

We generate free cash flow or nearly $1 billion up 16% from the prior year.

Representing a free cash flow margin of 29%.

Approaching our model target of 30%.

And we returned nearly $1 billion to shareholders through buybacks and dividends.

At a higher level of Fiveg upgrade cycle is now fully underway.

Expanding across four continents with over 80 carriers, and an expanding second smartphone and aiotv customers.

We expect a substantial upgrade cycle, that's the 5 billion mobile subscribers today migrate from their threeg and fourg devices to fiveg, creating a significant opportunity for skyworks.

Stakeholders are now seeing the compelling economics that this substantial technology inflection point with the momentum building into 2020 and beyond.

As we said in previous calls Fiveg is a technology not a product it offers gigabit speeds ultra low latency and greatly enhance network capacity.

Catalyzing, you've wide set of usage cases, while becoming the universal connector.

Although the smartphone will lead the transition of buying cheap, we see an even more compelling opportunity in new markets and applications.

Including industrial Aiotv.

Autonomous transport Smart cities artificial intelligence and the proliferation of high definition screening media.

More importantly, highly integrated connectivity engines will play a pivotal role and the deployment of this next generation standard.

Resolving the daunting analog and RF complexity that challenge the capabilities of existing hardware and networks.

Skyworks is squarely at the forefront of the sea change in connectivity.

We have a rich heritage and the design and execution of highly integrated and customizable system solutions.

Earning the trust of market leaders as they crossed the chasm from Fourg to Fiveg.

Our operational footprint goes far beyond units in scale.

It is centered on unique strategic technologies crafted in our own fabs, while creating sustainable competitive advantage.

Our technology strength is fortified by world class performance and scale across a broad array of capabilities.

Including Tc saw and bulk acoustic wave filters.

And expanded family of Mimo solutions.

And ultra high band and diversity receive modules.

Our highly customized system solution support a broad set of wireless protocols.

Including GPS Wi Fi Bluetooth, Laura Zigbee and of course, Fourg and Fiveg.

From our breakthrough Sky, one unit Sky five uniform forming platform.

Our fiveg small cell solutions.

I work comprehensive approach across both infrastructure and user equipment facilitates powerful high speed and and connectivity.

Oh, no winter mobile business traction in five GE is accelerating with design wins at leading Oems, leveraging our broad and growing set of platforms.

Our solutions, our purpose built to offer interoperability and customization across all baseband suppliers, including Qualcomm Mediatek Samsung yellow saw in high silicon.

And with the successful launch and expanding capabilities of our BAW filter portfolio, we are positioned to extend our reach across a bar a broader spectrum a foreign fiveg bands.

Moving to the Internet of things, we are ramping more than 10, new LT. He based design wins supporting tier one automotive customers.

We are powering someone else's first all in one indoor outdoor portable smart speakers.

Delivering LT eat powered aiotv engines to Sierra wireless for their industrial and transportation gateways.

Enabling a range of wearable devices, leveraging our GPS Wi Fi in cellular connectivity engines.

Expanding our reach into high performance audio with the introduction of our cognitive chipsets.

And we are executing on the launch of our wife by six platforms.

Expanding our customer sat with leaders, including Amazon, Eric 18, T. Juniper Lynxes and net you.

Now moving to the infrastructure markets.

Skyworks is leveraging its vast capability in gallium arsenide.

Paul technology, and ceramics to support strategic customers as they deploy their fiveg networks.

Fiveg infrastructure required new technologies and capabilities, which drives the need for unique set of complex solutions.

For example, massive mimo increases RF content up to eight times per base station.

With new antenna systems utilizing multiple channels.

And beam steering to deliver gigabit speeds.

As a company we remain focused on driving diversification across high value markets, while our customer sat continues to expand and is now numbered installs.

In addition, we are gaining momentum in new verticals, enabling wins with automotive leaders like continental Audi and BMW.

Along with industrial players.

Quoting Honeywell Siemens GE Philips in Rockwell.

So in summary, Skyworks has strategic partnerships with leading smartphone in I O T providers, along with a burgeoning set of entirely new customers enabled by the capabilities of Fiveg.

Differentiated system solutions with unmatched levels of integration performance.

Focused and strategic investments expanding our product portfolio, IP and scale and finally, a predictable business model that yields premium profitability and strong cash flow.

The strength of our design win pipeline, coupled with our experience across multiple technology generations position us well to convert these market opportunities into sustainable growth.

With that I will turn the call over to Chris for discussion of our Q4 in fiscal year performance as well as our outlook for Q1.

Thank Liam.

Skyworks revenue for the fourth fiscal quarter of 2019 was 827 million up 8% sequentially and 2 million above the midpoint of the outlook we provided in August .

When excluding the revenue from why way in both the June and September quarters, I would revenue increased 20% sequentially. This represents one of the stronger sequential growth rates for Skyworks.

Gross profit in the fourth quarter was 460 million, resulting in a gross margin of 50.3% inline with expectations.

Operating expenses were 135 million flattish through the March and June quarter.

Going forward operating expenses will come down as we implemented certain cost reductions during the fourth fiscal quarter.

We generated 281 million of operating income translating into an operating margin of 34% up 110 basis points from fiscal Q3.

Well the income was 3 million and our effective tax rate was 7.7% driving net income of 262 million or one dollar and 52 cents of diluted earnings per share up 13% sequentially.

Turning to the balance sheet and cash flow.

Fourth fiscal quarter cash flow from operations was 470 million and capital expenditures were 84 million, resulting in 333 million no free cash flow translating into a free cash flow margin of 40%.

We paid 75 million in dividends and repurchased 1.9 million shares of our common stock for a total of 146 billion.

This is the fourth quarter fiscal 2019, that's all to review our annual results.

We generated 3.4 billion of revenue we have gross profit of 1.7 billion, resulting in a gross margin.

50.6%.

Operating income was 1.2 billion, we've been operating margin of 34.5%.

Full year effective tax rate was 8.5% and net income was 1.1 billion translating into $6 in 17 cents of diluted earnings per share.

Cash flow from operations was 1.4 billion up 8.5% from last year.

We've got box at 398 million, resulting in a strong free cash flow of close to 1 billion and our target free cash flow margin of 30%.

We returned 932 million to shareholders in fiscal 2019.

Just under 100% of our free cash flow, we have to into 74 million of dividend payments and 658 million in share buybacks as we repurchased 8.9 million shares throughout the fiscal year.

We ended the fiscal year 19, with cash and investments of 1 billion and we have no doubt.

Now, let's move onto our outlook for Q1 fiscal 2020.

The initial loans of Fiveg and gains across a diverse set of high performance mobile solutions matched with solid traction and brought markets are driving accelerated growth into the December quarter.

For the first fiscal quarter of 2020, we anticipate revenue to be between 870 and 890 million.

Representing sequential growth of 6.5% at the midpoint of the range.

We expect gross margin at approximately 50% and operating expenses of approximately 132 million, which is 7 million below Q1 of last year as we continue to manage our operating expense level.

Below the line, we anticipate roughly 2.5 million an older income and a tax rate of 9%.

We expect our diluted share count to further reduce to approximately 171 million shares accordingly at the midpoint of these ranges we intend to deliver diluted earnings per share of one dollar and 65 cents with that I'll turn the call back over to Liam Thanks, Chris.

Skyworks continues to deliver consistently solid profitability, while generating strong cash flow.

Looking ahead, our market leading solutions are at the forefront the next major cycle and connectivity.

However, unlike the prior Threeg and Fourg upgrades, which were largely paced by smartphone units, we see fiveg as a transformational technology that will impact disrupt in fuel a connected economy that we have not yet seen more comprehensive in our markets today.

We addressed this opportunity with a proven culture of success driven by a talented team deep customer relationships strategic investments and global scale.

Positioning us to succeed at this very important stage of technology inflection, while executing the financial discipline to ensure shareholder value.

That concludes our prepared remarks, operator lets open the line for questions.

As a reminder to ask a question you will need to press star one in your telephone to withdraw your question you May press the pound key.

Given time restraints, please limit yourself to one question and one follow up and your first question comes from a line of Karl Ackerman from Cowen. Your line is open.

Hey, good afternoon, gentlemen, thanks, Troy, let me ask a question.

I wanted to focus on Fiveg for a moment. So some of your peers have got at least 200 million fiveg phones for next year.

I would appreciate how youre thinking about your opportunity for Fiveg with regard to geography, and whether or not we should anticipate the 40% content uplift.

That you've alluded to from Fourg to Fiveg.

Should that be realized over the duration of the ramp or is that recognize more immediately on initial devices and I've a follow up.

Sure well Fiveg of course is going to impact multiple markets multiple customers and the timing of that could be different depending on the geography in the in the specific OEM.

We are 100% engage with all the leading players we have a really significant opportunity to gain content with one that out now.

The reach of our portfolio continues to expand and we have some really significant customers that are in production. Now. We also have some really big customers. They are going to be launching next year. So while we're in great shape for we're demonstrating the capabilities that we discussed in prior calls I will tell you that the fiveg implementation is incredibly powerful for the consumer but Barry.

Challenging for the OEM and our job is to get in there and to the hard work with our customers and deliver the right kind of tech technology to make their systems work and that's what we're doing.

I appreciate that.

On Fiveg infrastructure, you referenced some design wins for massive mimo and the content being nearly eight times higher than for GE.

Do you see the revenue inflection more of a 2021 event or is that something that can ramp in the back half of 2020. Thank you yeah. No. That's a great question. So the infrastructure side of Fiveg is still a little bit behind schedule off. So we are seeing some great adoption with the handset players and there'll be ready to roll on infrastructure has been a little bit slow we've made some great progress spin.

Typically with Nokia and with Ericsson.

On Nokia's platform saw we've got opportunities that are.

Measured in the 10 to $15 per base station.

Significant opportunity, we're looking at antenna arrays that are very rich high content complex high margin.

To be the pivotal to that and they use a lot of unique technologies that we also bring to market, including some ceramic technologies.

And other filtering technologies as well as our gallium arsenide expertise. So we do have a great to hand in the infrastructure side that will work in adjacent to what we see and the mobile phone.

Your next question comes from a line of Vic ARIA from Bank of America Merrill Lynch. Your line is open.

Thanks for taking my question Jim for my first one.

How are you positioned opex and Capex wise.

Comes to addressing the Fiveg market I think you mentioned, some opex rightsizing and the quarter, which areas did you rightsized and just overall.

And then my question is coming from is that in the past you had one really large customer, but as the come to the fiveg opportunity.

Do you need to address a much wider range of customers I imagine or what I'm in a much wider range of products. So how do you managing opex and capex going into the Fiveg Heiko.

Sure Great question. So just to start off some of the reductions in Opex were more around to GE threeg products and legacy devices and moving R&D resources to higher end platforms like Sky five in the Fiveg Rollouts. So thats one part of it.

We are we are addressing all the customers in working and working across our market to deliver the right technology also note. When you mentioned capex one of the things that we do it skyworks as we craft our technology and build it in house, we don't we very rarely outsource we do it in house, we have incredible capabilities to customize a wider.

Range of TC saw products Tc saw based products would that filtering side and also our bulk acoustic wave portfolio. So the capex that we have it's actually strategic technology investments. These are not filters that we could buy in the open market there filters that we craft and customized and more customer by customer to implement puts a very different this.

And this dynamic business model than some of our peers.

Got it and from my follow up on gross margins I think Chris you mentioned that it would be approximately.

50%. So I'm just curious is it just makes that's driving them, perhaps kind of flat to slightly lower.

Then how should we think about the trajectory of gross margins getting into March.

Tends to be a seasonally down quarter.

Yeah.

If you back so first of all I'm I'm pleased with our gross margin performance in the September quarter. At 50.3, you also have to take into account that we had some serious headwinds we have the export ban on why we which was our second largest customer and most of those products War actually manufactured in house sold that was.

As soon as headwind for us, but I think the company Manish did very well. So we are guiding for December or approximately 50%. So we still have some lingering issues with the why we business and then of course when you look ahead into March and June we will go through our normal seasonality.

But then into second half of 2020, as we get back to a sequential growth growth that is fueled by five GE new.

Complex highly integrated products as well as our broad markets business, we will start seeing gross margins improvements.

All the way up to our target multiple of 53%.

And your next question comes from a line of Ambrish Srivastava from BMO. Your line is open.

Hi, guys or this is jamison, calling for Ambrish. So I was hoping that you guys could talk about little bit more about fiveg piggybacking on on calls commentary.

With Qualcomm has talked about 200 million Fiveg smartphones in 2020, and assuming you are able to get 50% market share and maybe half of the 25 dollar content you've talked about in frightened value that would imply about $1.3 billion and finally revenue possible for you guys. In 2020. So I was wondering if you guys could talk about the revenue.

Percentage mix of Fiveg in your mobile.

Your mobile segment this quarter, and where do you expect revenues and mix to land in 2020 beyond thank you.

Yes, we don't we're not going to guide mix to Fiveg, but I will tell you that we are at the forefront as we stated in the in the prepared remarks were at the forefront of this inflection without question, it's difficult to handicap, how many units, but I will tell you theres a lot of units coming Theres a lot of complexity on the table.

Everyone is going to come to market with a different play, but it's a great opportunity for this industry. It really is and what we love about our company is the flexibility that we have in the tools that we have to put together configurations with every customer.

Let me also say that we are we are.

Basically technology agnostic or base band agnostic, we will sell with a Qualcomm base band will will work with immediate tech platform. We have incredible content. There, we'll work with Samsung L. aside and if conditions change with while we will work with high silicon. So we have the tools and technology, we've been investing in this for years, we talked about decades of technology, it's real.

We've been through to GE Threeg Fourg, we know how hard it isn't fiveg, but it's a great opportunity.

So we're going to we're going to see an increasing level of revenue.

Fiveg and it will not just be smartphone it will be smartphone aiotv it'll be enterprise and will be factory automation and some incredible new new avenues that we haven't even explored yet so there's a lot coming.

And the business is ready to go we've made great investments in capacity and the right technologies and we're positioned for growth.

Okay. Thanks again for my follow up I was wondering if you could maybe touch on your plan for millimeter wave solutions just for your company given where Qualcomm is would there's any thoughts on the market in terms of liability in the revenue for handsets will be appreciated. Thank you sure sure, yes, well millimeter wave is an interesting technology and does saw can offer some pretty compelling.

Attributes around speed and performance the challenge with it though is it has some technical roadblocks right you need to have some very complex beam steering to implement this there's some line of sight limitations are there some cost limitations to and what we're seeing is.

Some of our handset partners are just not ready right now to engage in that technology and opting for subsea sub six gigahertz spiky technologies, where the market is pretty pretty rich and the opportunities pretty rich. So I think there's a possibility for millimeter wave to play a role in this industry and.

So the environment saw sporting events.

College campuses, where there's a great deal of density or there could be an opportunity for that but right now with its kind of still on the cost of whether the adoption will will take place or not Meanwhile, we're hedging our bets we're investing in the technology, we do a lot of our work internally as I mentioned weather gallium arsenide and filtering.

So we know the roadmap looks like to be a player and millimeter wave, but were going up we're going to take our time as we progress.

Your next question comes from a line of Blayne Curtis from Barclays. Your line is open.

Hey, guys. Thanks, sorry question, just wanted to get back to the Fiveg timing, you've seen Korea, Qualcomm talked about a march uptick in and I'm just kind of curious because you put that would comment that some the infrastructure is taking a little bit more time I know you don't want to guide margins is kind of curious we would use would you be able to see an uptick even.

And as early as the March quarter any comments on the direction there and then the pace through the rest of the or be helpful.

Sure Yeah, I mean, there should really be no difference between the peer group on what the units are going to be rights and we can all handicap that I think the issue and the opportunity plane is is what we do how do we execute all and what kind of content can we gain in this industry that that's kind of more to the point for us.

So couple of things if you look at the company year over year, we've done incredible enhancements in our TC saw capability and rounding out low band pad and trx across the board, which is great. But we've also up lifted the technology with bulk acoustic wave, we're already delivering ultra high band solutions right now that are very compelling and our customers love them.

We're moving in the mid and high band also with accounts.

And then you have just an incredible inflection in infrastructure that we talked about.

And then further on further on will start to see the fiveg opportunity really penetrate multi markets automotive machine to machine application. So we talked a little bit about that enterprise law really cool stuff that we're talking to customers about some of that maybe later into 20 late 2020 to 21, but this does a really.

The significant tail on that but in the meantime, all the companies that that taught you named and all the Oems that are on the table. We are deeply engaged and we have been for for quite a while ill and feeling really good about where this is moving.

Thanks, and then maybe just for Chris just if you give us any color in the September quarter that mix between mobile and broad markets in a perspective into December between those segment in terms of growth.

Yeah, absolutely so growth markets in the September quarter was approximately 33% of total revenue. So it's running now well above 1.1 billion annualized run rate.

This was down.

Slightly on a sequential basis, but you have to take into account that we also had why weve related revenue in that broke markets business. If I exclude why we actually it was up.

Sequentially as well as year over year in the mid single digits. So very pleased with.

I would performance in broke markets.

Multiple drivers there the Wi Fi six adoption.

The fiveg opportunity beyond to mobile phone.

As well as some good traction in our audio play that we have as well, yes. When let me let me add a couple of other interesting points here. In addition to kind of that run rate opportunities in broad markets. We've really been focused on cost what I call customer acquisition going out there in finding new accounts that we can populate with our technology.

And we've made some really good progress design wins now with Honeywell design wins with Ford design wins with Continental Rockwell Siemens.

We have some other great accounts that we can't talk about yet that are on the cost. So we're really happy with the ability to to run broad markets and a diversified way, but also capture significant customers that just havent been part of the Skyworks family right as we havent been selling these guys.

And with the technology inflection in Fiveg and the need for these companies to go to a wireless engine. It's a great. It's a great chance for us to do our work. So there's some other cool things happening and broad markets that really weren't on the table year or two ago.

And your next question comes from a line of Craig Ellis from B. Riley FBR. Your line is open.

Yes, thanks for taking the question and congratulations on the performance guys.

I wanted to follow up with some of the five she commentary both prepared and in Q in a so I think if we look back at orgy integrated mobile was a business that could consistently be a mid teens year on year grower and and now with five cheat. The company has expanded its filter portfolio with BAW you've got.

Internal filter supply, we've never had that before an air interface transition and you've got it top to bottom. So my question is as you look at the engagements that exist across your different Oems do you feel like you're gaining the lineup site for that segment to not only returned to growth but.

Actually returned to mid teens double digit year on year for.

Yes, I think the as you know like the opportunity is very very strong right now and the indications we have with the customers we've been working with our powerful and the complexity is way up and some of the point that you just made about owning our facilities. The big deal. It's a big deal we could have gone outside to do that and had at lower performing engine, it's not but is not the way.

We want to go so there's a lot of complexity right now theres that customer this theres a customer engagement with US we're always were always reaching our accounts, but they're coming in was too.

So it's a difficult transition to make technically but it has incredible benefits all and so we saw log great action in the last quarter a lot of lot of action in design wins.

Lots of discussions lots of visits to our sites from our leading customers to go in and really kick the tires and some of the things that we're working on.

And those customers walking away with confidence. So we think this is going to be a very significant. This is this is a more than a mobile inflection. This is this is a technology shift thats going to disrupt the markets that we all play in here right. So I think isn't great stuff going on and we'll start to see more and more customers evolve.

Classic mobile customers, but then kind of that second wave into Aiotv enterprise et cetera, where theres just a long tail of opportunity. So we feel good about it I feel that the design win activity in the last.

Six months or so has really accelerated.

The sampling activity.

Crossed a whole set of Oems also some really good work with baseband partners. We've done some exceptional work with Mediatek for example, transitioning from a strong position in phase six now shifting phase seven which is all fiveg.

Launching the higher the higher frequency bands with bar. So it's a Nick it's a compelling time right right now for Skyworks to execute were not opportunity constrained, it's about getting out there and helping our customers went.

That's really helpful. Chris that the next question is for you and I wanted to follow up on my comments that the.

Gross margins for it could move from current levels up towards the 53%.

Target model, what I wanted to us break that down and get your help just.

On identifying what the specific drivers are so can you just help us understand how we get from first 50% to 51% is that all just going to be volume coming back and kind of making up for the last subway and then more significantly I think getting from 51% to 53%. If you could just help us understand how much of that is help from broad markets.

We have naira.

Mix shift within the integrated mobile portfolio from Fourg to Fiveg et cetera. It would help give us some clarity on how we get to 53%. Thank you.

Yes, that's a good question and so.

Advances into previous question to provide some of the headwinds of causes.

Why we revenue.

Matt.

That almost disappeared and why we was running on or about 15% of total revenue and so that's definitely a headwind, but but nevertheless, I think we've been able to keep the margins above the 50% and looking forward. There are three major blocks to drive margin improvement and the first one the most important.

On his continued to develop highly integrated complex high value the type of products to our customers that make down.

Little bit better than that make the user experience better and we do not all the time and Fiveg is a great opportunity to demonstrate our technology leadership and help improve as a result of that our margins of course. In addition to that we will continue to work.

Our operational cost structure and drive down the cost in our factories and move our suppliers and all of that and then last Wouldnt lease of course, yes, there is a little bit of a tailwind in terms of mix.

I would brought markets business has a higher gross margins on our mobile business and our broke marks business has been growing and we'll continue to be growing faster than mobile and so we get a little bit of a tail.

Well, yes, and I will add one thing off.

To that comment I think that if you look at Fiveg and the complexity of Fiveg and the types of unique systems in engines that are being deployed the margins. There are going to be higher I think there's going to be fewer players in the industry that can execute.

To that to the level that our customers need to be successful. So I think you've got a case, where the fiveg inflection and the power of that connection in the value that that's providing is going to translate.

To better gross margins. It's just it's just it's just the way thats going right now working within our factories is going to make it even even easier for us, but there is going to be in there should be for Ross meaningful margin move with the rollout of Fiveg as as we get higher level of concentration there.

Your next question comes from the line of Craig Hettenbach from Morgan Stanley . Your line is open.

Yes. Thanks. So first question just slipped a follow up on the buyback activity you know you've seen that mostly in diversity receive at this point and then just how you think about it and the future layer and say you mentioned kind of ultra high band pad and things like that.

Sure Craig Yes, so we actually right now today have been shipping and high volume on an ultra high band path on that includes our bar device and that's running at about 3.3 gig Craig. So we're looking at high frequency high band devices all were sampling.

More than 10 customers with our bulk acoustic wave technology across a broad set of frequencies and spectrum and we've had we've had strategic customers come and test our metal and they like what they see so we're going to continue advancing that cat category and we'll use the filtering technology that that's that's best equipped for the application will continue to.

TC saw and some areas will use bulk acoustic wave in some areas maybe it'll be in diversity receive maybe it will be in transmit chain. So again, just having the ability to create that unique customization for each and every one of our accounts is important for us. So we've made those investments and you should expect more from us on the ball side as as as the year utterance.

Here, we get further into 2020.

Got it and then just a follow up the Chris I know you guys talked about issue in source filters, the inventories kind of higher than historic.

How are you thinking about managing that into.

What's typically the seasonally weaker March quarter.

Yes, so I feel comfortable with where we on from an inventory level actually the days of inventory came down four days 235 days.

And is expected to continue to come down in the December quarter.

But looking forward.

Inventory is going to fluctuate between 120 days 240 145 days.

And again that is higher than.

A couple of use a goal mainly driven by our filter manufacturing night, we continue to expand the capacity not only in TC saw but now also all having made major investments to.

Get bulk acoustic wave capacity into our field operation and so that is driving the inventories into 220 245 days.

And your next question comes from a line of Chris Okay. So from Raymond James Your line is open.

Yes. Thank you first question is on while way.

And I think last quarter you. Your commentary was that the majority of the restrictions were on the infrastructure products.

Yet in the handset products sold while where you weren't getting demand signals could you give an update on a on where that stands now.

How much while way is in the guidance right now and do you expect that to come back at at some point going forward from from speaking to the handset side.

Yes, so there why we revenue played out exactly in line with our expectations.

In the September quarter, we expected to approximately $10 million revenue and that's what it that's what it came in so looking forward.

We believe that why we will continue to run up approximately do that level, maybe it might be picking up a little bit, but a lot of that will depend on this whole situation with while we're in the export ban will evolve.

Chris This is really just about being in compliance with the export ban it's not about share loss or gain its about being in compliance and as Chris said 10 million was the number for the quarter overtime, if things change we could be right back in the saddled with this customer there were a number two customer for us not long ago. So it's not to it's not to keep its not about technology on her brand or.

Market share, it's really about thing and compliance all with US law at this point and if things change, we'll we'll be ready, we'll be ready to alter.

All right as a follow up.

I guess it have a follow up on that and their prism investor concerns over other fall out around the trade tensions where perhaps some Chinese customers would seek to be less reliant on on on us content.

Perhaps even backsliding insert into discrete solutions.

Could you talk to that what the customers are telling you are the is there any evidence where you've you've got customers that.

Perhaps would like to go away from U.S. content and as you move into Fiveg them work and a higher complexity is that even though a feasible solution. At this point can you develop of Fiveg phone that that uses decreased discrete solutions.

Yeah, So I'll start I'll get the second part and then I'll go to that the other thats at the front any your question. So.

I think it's very difficult to deliver the kind of compelling technology that is needed in fiveg device or I really do I believe that all and I think you US companies are have played a vital role in that area and I think we have this great technology, it's difficult to do it without some of the things that we make here at Skyworks and some other some of our other peers.

So thats one but at the other side here is the while we situation is a while we situation there our trade issues in China, we get it but if you look outside walk away and you look at Oppo vivo NGL may our business is very strong very strong and there's a lot of fiveg launches going on right now with Skyworks Oh, there were some initial launches where we had a base.

And provider in there and there was some content that we didnt that we didnt win but thats turning over so we see tremendous momentum and what we call. The OPX side, the Apple vivo Shomi side within China. So that continues to go on and as Chris noted were plant, we're playing it down with Wawa, We've got a number now that's conservative we're going to.

Focus on everybody else and if Wally comes back like I said that revenue will come back.

Your next question comes from the line of Edward Snyder from Charter equity Your line is open.

Thanks, a lot.

If I could.

This event last set of ultra high better sub six stuff Qualcomm, obviously based on their Columbus is going to take it all others Thats something like virtually all a base bad to tennis solutions for 200, something different slaps you twice is.

Leaving that aside for now and any comments you want to make on what you're seeing.

How does it rests on that but more importantly, it looks like that the architectures that are coming out the next year, but I'm trying to mobile looks a little the 79 bands. This is what's your opinion, though on contract. So thats why I will try that's been out for a while probably not only about $2 content or you're seeing this rise much faster than expected because you're.

During these extra beds and this at you expect to capture traditional share which has been relatively high that spot.

The next year. So are you getting more competition that I've a follow up.

Yes, no. That's a great great question add water insight to that so we are seeing some real good action on the you HB pad.

Run around 3335.

And so what you got there is some great opportunity to continue to expand that Thats working out great. We're also looking at a number of other solutions out with our China customers and other Oems and then the other major catalyst for US in this area is Mediatech and you know these guys really well we've done a lot of work with Mediatek back to the Tucci days and.

We had nice position on phase six, but when you start to roll into phase seven our platform position that mediatek really compelling we've got sky five we've got Trx technology, we have you HB opportunities.

And just some incredible new technologies across that platform and we feel really good about that.

We could be looking at a seven $8 handle on Mediatech chipset attach here and phase seven so we're excited about that anytime we're continuing to do the work with oppo vivo Xiaomi. Despite the base pan provider of whatever it may be if its media tech or not Mediatech, Samsung Lxi will work it if it's Qualcomm Oregon.

There's a lot of action going on there but.

I would say that the mediatech transition is going to be quite strong hasn't happened yet, but it's headed for the second half of the year to be really compelling driver.

And then I'm glad you brought that up goes my second question basically I mean that science Williams, they're telling say six last year. So first full module design.

And for safety Citic. It looked like court with took most of the main pass you guys were all over the place or the other sections of it but it sounds like now they liked it allows us to really accelerate the deployment of both they should say seven stated before Bds tickets are fiveg out.

We saw that some of the reports coming out of all the quarter Big upside not only number flashy falls to the numbers are using more of these high content modules.

Do you kind of reset back a little bit last year, just because on the transition to this new architecture level I am just wait for safety.

I know, you're taking some of that back but outside of say trx and all the other areas. You guys were tuners, we saw that outside the back at the main pass do you expect to gain back some of the sheer nothing I'm just getting comfortable with that design or are we just see a bifurcation here, which you add corvo, taking up nearly all the content in this.

Following into just could it be bifurcated may test for them and most everything else you guys. What what's your feeling all that yeah, I think well I think you've got you've got a lot of that captured you definitely have an increased opportunity and we're certainly not going to get all the business would like to get the lion share I think we will but it's an increased opportunity.

And and the complexity that you see in these new phones. Despite the phase seven devices, specifically our daunting. It takes the best in the brightest to go out there and execute so we're seeing that but I will tell you that in addition to the.

The traditional stuff that you've seen low band pad and maybe some of the directs we're starting to move up to mid and high band, we're starting to move up with mid high band pads, which could be really.

Meaningful high potency opportunity for us for content.

You mentioned, we talked about the U.S. feed thats continuing to gain not just with mediatek, but with some other accounts. So the aperture has widened a bit but but one of the common themes. Here is complexity like you said the number of devices. The number of of Handoffs carrier aggregation. The the power consumption in the efficiency required to drive these fiveg devices. It just going to be again.

Changer in terms of challenge and Thats exactly what we want to see so.

Theres, some really good stuff out there.

We hope to lead in this market, but it's a great opportunity for for the industry as well.

And our last question comes from the line of Bill Peterson from JP Morgan Your line is open.

Yes, Thanks for sneaking me and I have some questions around the broad markets business I guess first of the default the planes question.

Do you anticipate sequential growth in the December quarter, I mean, balawi as kind of running at a low level.

And then I guess as you think about the fiscal year based off your design win pipeline.

Talked about white by section and somebody other opportunities.

How should we think about growth in that can never turn back to double digit growth as we think about them this fiscal year.

Yes, just for for the December quarter broke markets normal seasonality is down 8% to 10% we saw than fiscal 18, we saw in fiscal 19, and so we expect something similar in the December quarter fiscal 20 normal seasonality, having said that on a full year basis, yes, we.

We do believe that brought markets given all the drivers that we talked about it.

Could be back to double digits year over year growth.

Yeah and recall if you look at that they obviously if you look at the proxy for semi and 2019, you're looking at double digit declines for muscles markets abroad markets within our business. All we felt that you'd be hey, pretty well grew pretty nicely, but we're going to continue investment and try and into 2020.

Okay. Thanks for that color and I guess.

Housekeeping, how should we think about opex trajectory throughout the year, you're bringing it down here in the December quarter.

We expect that's kind of grow somewhat in line as revenues continue to grow and maybe return to year on your growth and then your tax rate I guess, 9%, we just assume that for the fiscal year as well.

Yes on Opex were going to remain disciplined but at the same time, we know gona hesitate to make the necessary investments to fuel the growth of the business and make those necessary investments in technology five Gi.

Broke markets support of the middle market. So so yes overtime here in fiscal 20, we will see some modest increases in the Opex. It's running on Audubon all 16% also to revenue right now, which I do believe is world class.

And we'll continue to manage it and then on the tax rate you on a full year bases on at about 9% is is a good number.

Ladies and gentlemen that concludes today's question and answer session I'll now turn the call back over to Mr. Griffin for any closing remarks.

Thank you all for participating on today's call, we look forward to seeing what upcoming investor conferences during the quarter. Thank you.

Yes.

This concludes today's conference call you may now disconnect.